Lecture 5 - Entrepreneurship
Summary of the concepts discussed in Prof. Rosier's lecture. Innovation and Creativity There would be no progress in the human race without combining the opposing concepts of creativity and innovation. Creativity allows the free mind to discover new concepts, find new perspectives. Innovation gives order to these ideas, rationalises them, and allows their production in the real world. In the modern world, the need for both creativity and innovation is clearly seen in corporations. Creativity is found in the research and development phase, in order to determine a required product or a new use for an old one. This can produce a plethora of over-the top, impossible or simply crazy ideas. All of these may be useful in discovering a new product and require a free environment in order to be developed. Using these ideas and making them useful requires innovation, which flourishes in a more structured environment. The sudden change from chaos to order can be difficult for some. Management’s job is to oversee this chaos and attempt to provide order. Creative Destruction The creation of new concepts will naturally obsolete the old. Without this, progress cannot be made. This is the general idea behind creative destruction, a phrase coined by Joseph A. Shumpeter. This concept appears to hold true throughout history. For instance, the evolution of transportation has led from horses to trains to cars. While this is not entirely true, creative destruction has taken place within each of these. Better methods were developed for raising stronger, faster horses. More efficient trains have taken the place of older models. Car companies are expected to create faster, more reliable versions of previous models in order to stay competitive. These are artificial forms of natural selection which aims to constantly refine and endlessly improve on what is currently available. Creative destruction is rarely a linear process. This is due to the change in needs between generations. For example, one generation may prioritise owning a car over everything else. This will result in most other facilities changing to meet this need. Restaurants need to change to allow food on the go, which resulted in the development of drive-through diners. Telephones need to be made portable, resulting in the invention of car phones, followed by mobile phones. In turn, an innovation caused by the needs of the previous generation will become the focus of the next, such as the ownership of a phone. This will cause innovation to revolve around the new focus, which may then result in the production of the focus for the next generation, and so on. The result of this cycle is that innovation continues to evolve, each generation adding more functions, new perspectives on old concepts. The end result is a constant need for improvement over the previous generation to meet the needs of the new generation, with creative destruction constantly in flux. 5 Theories for New Product Innovation #Signalling Theory #*Involves two parties with access to different information. #**The sender signals in their own favour, modifies the behaviour of the receiver. #Agency Theory #*Principal (receiver in previous theory) monitors agent (sender), aim of aligning interests -> goal. #*Operates in conditions of information asymmetry. #**Moral hazard: The agent may use gap in knowledge to act inappropriately (e.g. embezzlement). #Pecking Order Theory #*The cost to finance an endeavour is proportional to the amount of asymmetric information. #**The people who know more about you will (generally) be more willing to give more money for less of a return. #Intellectual Capital Theory (human capital) #*In order to be competitive, you must have the right people. #*Most of the knowledge of these people is tacit (non-verbal). #**Once this becomes codified (written down), it becomes the intellectual property of business - Intellectual capital. #Resource-Based Theory #*The reason for the success of one company over another: sustained advantage. #*Requirements: #**Is it valuable? (required for any success at all) #**Is it rare? (required for temporary advantage) #**Is it costly to imitate? (can lead to sustained advantage if...) #**Exploited by the organization? (If yes, sustained advantage is achieved) References and recommended reading #Pinn, I. (2009) The Big Four. Available from: http://www.ft.com/cms/s/0/5e61e20c-0f44-11de-ba10-0000779fd2ac.html#axzz3IHtIUgCr #South Africa Venues (2014) Springbok. Available from: http://www.sa-venues.com/game-reserves/nc_rolfontein.htm #Jackson, E. (2013) Sharing Ideas. Available from: http://ywmovement.org/the-4-types-of-volunteers-and-how-you-should-manage-them/ Lectures Previous Lecture: Creative Thinking Next Lecture: Workplace Skills Home Page Category:Lectures